Mohegan Sun faces grim reality

Published September 16. 2010 2:05AM

The 355 layoffs at Mohegan Sun this week are demonstrative of the difficult task the state and nation face in digging out of the persistent economic slump. The public is told it is no longer a recession because the Gross Domestic Product is slowly growing. But as they say, if it walks like a duck and quacks like a duck ...

The loss of jobs at the region's two tribal casinos - Mohegan Sun and Foxwoods Resort Casino - is both a symptom of the economic malaise and a development that will make things worse locally.

When the housing bubble burst three years ago, it laid bare an underlying economic weakness. Exacerbating the downfall in the economy was the collapse of reckless Wall Street investments based on bad mortgages. In short order, the housing market collapsed, consumer buying slowed, individuals saw their retirement savings evaporate, job losses mounted and government deficit spending ballooned.

During the post-9/11 recession, the two casinos had acted as a buffer for the region, continuing to grow jobs, bolstered by consumers who still felt they had sufficient disposable income for gaming and the other amenities offered by the resort destinations.

Such was not the case in this recession. Consumers, uneasy about the poor job market, their diminished retirement accounts and lower home values, have trimmed recreational spending. Casino management, it appears, has finally come to recognize this as a fundamental shift in consumer behavior and not a short-lived change.

To their credit, tribal management avoided layoffs for as long as it could, depending on natural job attrition to cut costs while awaiting a recovery. But if revenues do not support labor costs, at some point something has to give.

And so a downward cycle continues, with hundreds of laid-off casino workers now having less buying power and greater financial insecurity, all to the detriment of other businesses in the region and to consumer confidence.

Only good and lasting job growth will break the cycle. The state must do all it can to make Connecticut business-friendly by streamlining regulations and simplifying paperwork.

The next governor and legislature must get an honest budget passed, providing a stable environment for business investment, rather than the existing uncertainty about how the fiscal crisis will be handled. Connecticut must focus its education system on training and retraining workers in fields where jobs are growing, such as technology and health care.

When the casinos are hiring again, it will be a sign the patient is recovering. As of now, the prognosis remains poor.